HMRC loan charge review: New settlement opportunity offers major tax relief

On 26 November 2025, HMRC announced its response to the independent review into the controversial loan charge. It was designed to counter tax avoidance schemes that disguised taxable income as non-taxable loans. HMRC has admitted that the original intention of the legislation was to incentivise participants of disguised remuneration tax avoidance schemes to bring their tax affairs up before the legislation came into force.

HMRC estimates that there are 37,000 individuals with outstanding tax liabilities relating to the loan charge.

HMRC has stated that it will adopt all the recommendations provided by the independent review, bar one. In a very positive step, HMRC will offer a new settlement opportunity for those affected by the loan charge that have not yet settled with significant beneficial terms.

The key terms of the new settlement opportunity

• Tax will be charged as if it was in the years in which the loans were made, instead of all outstanding balances being charged at 2019 rates.
• A deduction for historic promoter fees will be allowed, up to a maximum of £10,000 per year against the disguised income.
• In addition to the recommendations, the revised settlement amount will be reduced by a further £5,000. HMRC believe this will result in many people not having to pay any tax.
• No late payment interest will be charged. This is expected to reduce individuals’ overall liabilities by up to 20%.
• HMRC will not pursue historical inheritance tax liabilities involving trusts.
• Where a person is unable to pay the new amount in full immediately, HMRC will agree a payment arrangement tailored over five years, without having to discuss affordability with HMRC — forward interest will apply as normal if a person decides to pay via instalments.
• The maximum reduction for any one person will be limited to £70,000 on what the person already owed because of the loan charge.

Next steps for affected individuals

The new settlement terms will only be available to those who sign up for the new settlement opportunity. HMRC has stated that it will write to people affected in early 2026 with an invitation to settle on the beneficial terms available. HMRC suggests that anyone wishing to consider the new settlement terms may want to approach the named contact in the counter-avoidance team to expedite matters. They have asked that people provide details of the marketed tax avoidance schemes that they used, which tax years are affected and how much was received in each tax year.

As yet, there are no details as to when the new settlement opportunity facility will be launched or, more importantly, when registering and adopting the settlement terms will be withdrawn. HMRC historically has afforded individuals a limited window of opportunity to participate in settlement opportunities. Anyone affected by this announcement should carefully consider the new settlement opportunity as soon as more information is available.

How Moore Kingston Smith can help

Moore Kingston Smith specialises in assisting clients to regularise historical tax issues and can help with all aspects of the new settlement opportunity. Contact us to ensure your liability will be kept to a minimum and that the full settlement terms are considered, including time to pay.